Poster shock can change retailers’ approach to sales

Shoppers look at Macy’s Black Friday specials in Maumee, Ohio, November 27, 2020.

Stephen Zenner | SOPA photos | Light Rocket | Getty Images

Keith Fitzgerald has gone to great lengths this holiday season to make sure he gets the perfect gift.

Fitzgerald, a 40-year-old hairdresser, searched online and in stores for a special edition Lego: Nearly 4000pcs a set Which resembles the house in the classic Christmas, “Home Alone” – complete with booby traps and zip-line to the treehouse backyard. He knew a $250 package would please his friend on the last night of Hanukkah.

However, when he logged onto the Lego website, the set was sold out. No stores nearby have any stock. He reached out to family and friends across the country and sought help from a friend who queued up at a New York City store, bought it for him and agreed to mail the giant box to his home near Richmond, Virginia.

“Shipping, that’s a little extra, but it’s worth it,” Fitzgerald said.

Consumer appetite for spending and a global supply chain crisis collide this holiday season. For shoppers, this makes it hard to find some toys, clothes, and other coveted items, even as retailers like them. Walmart And targeting Say that there will be a lot of goods to choose from on the shelves. It also drives up prices and flips the script for shoppers who used to be motivated by a deal.

US consumers will see lower discounts across all major gift categories, according to Adobe Analytics, which tracks retailers’ websites. For example, electronics are expected to peak at 22% off during the holiday season versus 27% in 2020. Discounts on toys will peak at 16% compared to 19% a year ago. The company expects apparel to peak at 15% instead of 20% in 2020.

Shoppers will still see the biggest discounts on major retail holidays, Thanksgiving, Black Friday and Internet Monday, according to Adobe. Even these prices will not be low. On average, Adobe has estimated that shoppers will pay 9% more during Internet Week than last year.

Lucky it’s on the shelf.

With high consumer demand and low stocks of some items, some retailers have found themselves in the upper hand. shares Messi And kohl It rose after retailers reported quarterly results that benefited from weak inventory and a few wide write-offs.

In third-quarter earnings calls, department store leaders said they managed to Transportation costs are higher than freight and reduce huge price reductions When selling clothes, shoes and household goods. Fewer items are also ending up on clearance shelves in department stores, too. This leads to higher profits.

Retailers don’t need cuts in the same way this holiday, said Luke Watteau, professor of marketing at Georgetown University’s McDonough School of Business. In fact, he said, retailers would be silly to do that. The fear of not finding a much needed item is enough motivation for people to rush to the store or the retailer’s website — and to get them to pay more.

He said retailers no longer need to message shoppers in the same way regarding sales.

“They tell them look, the toy you want to give your child might not be there later,” he said. “Shop early. Don’t go get the discounts. You’re really lucky that it’s on the shelf.”

Retrain shoppers

For retailers, moving away from dramatically lower prices and competing with competitors on price alone can create opportunity, said Katie Thomas, president of the Kearney Institute for Consumers. In the short term, companies can pass on inflated costs for materials and shipping and have fewer items flagged and added to the clearance rack.

In the long run, she said, it could provide an opportunity to retrain American shoppers who have long been associated with deals.

“Other countries are not as excluded as we are,” she said. “We’ve trained American consumers to wait until everything is agreed upon.”

This could have significant ramifications on companies’ operating margins and could lead to higher profits.

She said retailers can test and learn how to set prices appropriately or differentiate in other ways. For example, consumer-oriented companies, such as baggage company Away and clothing seller Everlane, rarely discount and promote their exclusive products or customer service instead. some likes An apple You have such a loyal fan who will stand in line for hours just to buy an item at full price.

“I think about it from the simplest consumer point of view, which is ‘If everyone is waiting to buy everything in the bargain, you’re not getting the right price or the quality isn’t good enough,'” she said.

Macy’s CEO Jeff Gennette said: In an interview, the department store tested its pricing approach. I’ve learned that there is a “price cap” for items such as a basic T-shirt or jeans – but not nearly as much as over the top of fashion.

Other retailers have talked about seeing shoppers that are less price sensitive, too.

textureM., who owns Coach, Kate Spade and Stuart Weitzman, notes that customers are more willing to pay for handbags, even when products are at full price. Joanne Krivoiserat, CEO of the company, said the style, not just the low price, is inspiring customers to buy.

“We are seeing little resistance to prices,” she said in an interview. “And you know, I think that’s an indication that our brands have pricing power.”

And Newell BrandsThe owner of home brands like Calphalon said consumers are buying premium versions of cookware and even food storage, according to Chris Malkowsky, the company’s chief home solutions executive.

However, the question is whether this willingness to splurge is a short-term change in consumer mindset — or a permanent shift in people buying the goods they want, with less emphasis on price.

Walmart And targeting swung the other way, Committed to maintaining price and emphasizing value in an inflationary environment.

holiday sales It is expected to set a record From $843.4 billion to $859 billion in sales, which is an increase of 8.5% to 10.5%, according to the National Retail Federation.

Thomas said if holiday sales meet or exceed those expectations – even during the period when inflation has hit Its highest level in more than 30 years Retailers may feel emboldened to keep prices higher in the future.

Fitzgerald, who bought the Lego set, said he’s seen supply chain challenges in recent months. At his hair salon, some hair color, shampoo, and other things were put off. He struggled to find shower curtain liner in the store recently when he was getting ready to host an out-of-town guest.

He said he was happy to find the Home Alone Lego set and is eager to give it to his friend, Will. It’s the first holiday season together—and this year, they’re planning to get engaged. That, he said, made the high price and hassle of mailing a friend to Virginia worthwhile.

“I laid the groundwork to tell him he didn’t get it,” he said. “So I think he’d really be surprised. I don’t think I’ll always be able to surprise him that much, but we’re sharing this year and it’s our first big holiday season together, so I wanted to make sure it was going to be an unforgettable holiday season from start to finish.”

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